sidewa "squawk alley" is live ♪ ♪ see that stranger coming over here ♪ ♪ you don't recognize him, i know your preacher will ♪ ♪ got a voice like sugar, sugar in your teeth ♪ >> good thursday morning, welcome to "squawk alley," i'm carl quintanilla, the new york stock exchange obviously a selloff at the open. dow session low about 406. but we've shaved some of that off more supply eiers cutting ties h huawei mike pompeo sat down with squawk earlier this morning and talked about those concerns. >> you saw what president trump has undertaken with respect to china for too long this is not partisan presidents from both parties had ignored the challenges that were presented to american workers, to american technology, and to american national security that china presents, and he is pushing back in every element

the decision that was made to which huawei had an enormous national security to it. it is deeply tied to the chinese communist party. that puts information that crosses the networks at risk >> joining us this morning, business insiderer h henry blod. the rhetoric gets a little more heated, a little more chilling as this trade war is being talked about as a tech war. >> that's right, and speaking as a citizen, part of the problem i'm having is this administration's credibility is so low that it is very hard to say, you know what, they're really onto something. something has to change in the relationship we've got to make the rules right, and what i am worried about is the same thing that followed the government shutdown, which is really this is just all about looking tough and eventually here when we've done a lot of damage to a lot of americans and a lot of american companies in the economy there

will be a deal and the president will say, see, it's the best deal ever, and in fact, it will just be a very minor change that he can celebrate that's what i'm worried about. >> bob, i think if you spoke to the folks at huawei, what they will tell you is they have been anticipating something like this for a long time, which is the reason they've been makesing investments into an option b in terms of supply chain that might not involve american companies i think the sentiment there might be that we're settling for a longer haul in terms of those dynamics do you think the market is actually taking the full effect of that into account right now >> it's starting it o'so my old friend used to say we have been in a denial really lay for a while now. the denial is we're not going to have a real trade war. we all know a deal is going to be made, right the reality is there is no trade talks going on right now this g20 meeting is a phantom right now. traders are starting to realize the underlings have to set the terms, and there's no trade talks that are actually set, and everyone's looking saying how are they going to make a deal in june when they haven't even set the groundwork for trade talks

now to continue. they can't just say let's pick it up where we did before, and the market's grappling with that right now. we have incremental growth issues the brexit's still there the pmi numbers in europe were kind of crummy if you're a bull on global growth you have to realize the trade issues are going to get resolved if you realize they're not going to ge get resolved, it's hard to be bullish on the global market and earnings numbers have to come down. >> is this what doubt looks like though we're trading around late march levels we talked about this for quite a while, you were talking about what you really need to factor in if you believe that trade talks are breaking down, that earnings per share are going to be affected. it seems like we're nowhere near there. >> i'll tell you where you need to go. we went through this three weeks ago, 2,600 is the typical number people will use on the s&p 500 right now. we're 50 points away from the 200 day moving average, but if you simply say let's assume earnings are going to be

flattish this year, not up, flattish, and you lower the multiple because global growth you have a lower multiple so instead of 17 times forward, you get into the 25, $2,600 easily assume flattish, assume lower multiple and lower global growth and you're 2,000 points lower on the dow and s&p 500, and if you start saying no, wait a minute, we're going it have a global recession and you have negative earnings growth, now you're even -- now you're at 2,500 and below. it's not hard to get to these numbers, and you're right, the bulls keep saying, hey, what's the worry? we're 4% from historic highs you guys are making up stuff we're not making up stuff. >> the bulls say that and say the whole thing could be undone by a tweet, and you could be off to the races literally with one tweet. >> yes if the economy starts -- the global economy starts to pick up steam again, some of the early recessionary warnings, yellow flanges that we're seeing, starts to change, everything

goes green, but sure you'll have a short-term rally usually it is me that is putting out the reasonable ways you could have a severe market pullback and then people through -- so thank you. >> with a market this high, the risk is to the downside. we're one tweet away from a new high and one tweet away from a 10% correction that's what he said. he's right it sounds crazy it makes everybody nuts. it makes the market nuts. >> our data desk is looking at names in a bear market, down 20% from the high. apple, nvidia, cat, boeing, intel, halliburton, macy's, nordstrom. the markets realize some of this already, and priced some of it in. >> that's right. >> you don't disagree with that? >> i don't gis agree with that at all the ipo market is still open some companies are still doing well to bob's point. >> there's tides in defensive names and let's buy consumer staples. if there is a global slowdown of notable proportions, forget about it, the consumer staples

names are too high, earnings are too high for them too, and they're going to come down how do you get to 2,600, that's how. we have taken down retailers 20% for kohl's this week alone been crazy but there's whole pockets of the market that are still at that just down 2 or 3 or 4%, and a global recession will bring those numbers down as well that's why this is a very risky game to play to let it go on and on. >> retailers were really -- home depot, you read kohl's what they were saying this week, they were not good and best buy said we're not going to tell you anything about -- we're going to assume this doesn't happen and here's our guidance based on the idea this doesn't happen and the guidance was fabulous and the stock was down 4% because the market looked right through that >> yeah. >> henry, here's what i'm trying to figure out how to parse i can understand why semiconductor stocks and hardware tech stocks would be selling off but some of the names that mainly fall under communication services that don't have the exposure at least directly to china, are those

defensive plays for investors right now, or should they be selling off as much as they are? >> i think it's investors looking at it say whoa, let's de-risk a little bit i think you have to go back to president trump, begins with the shutdown husband behavior in the shutdown surprised a lot of people he stuck with it for a long time before he caved. in this case he's making all the same noises about sticking with it for a long time no matter how much pain builds up, and it's real, and i think investors have to look at that and say, yeah, he just might do it. >> look at the bond yields going down that's taking the winds out of financials that's a problem oil's down second day in a row that's a global growth concern issue. i mean they're only 6% of the sf s&p. you get little legs of this slowly get taken out from under you. that's how suddenly you just -- suddenly you're down below the 200 day moving average and people get a little more concerned. >> and i know that you are going to continue to watch that for us, bob pisani, thanks henry, stick around, we want to turn now to recent ipos,

under pressure, what's been a volatile market, mark cuban echoing steve bannon saying the first step in the u.s./china war should be to shut down all chinese ipos cameron, we've given a lot of attention to uber, lyft, but overall the ipo picture pretty nuanced. there are some names that have done pretty well despite this volatility how does it look to you? >> i think the ones you've seen do well tend to be the enterprise stocks, zoom, and some of these companies that have recurring revenue, clients they've had for years and years, good forecasting ability those stocks seem to have done fairly well post-ipo lyft and uber have seen a lot of choppiness, with all these names you're in the first weeks and months of trading so it's going to be a really long story ahead of them. it's too early to tell who are the winners and losers. >> this is the headline from earlier in the month on cnbc, nasdaq, the pipeline for chinese companies listing in the u.s. is stronger than it's ever been

do you think that goes away? >> well, it would be very interesting at this point if mark cuban wants to shut down ipos that would be a huge shock in this trade war. does it stay that way? i don't know i do think that the ipo market is open. i think it's very instructive to look at uber, could not have been better advertised literally everybody in the world who wanted a shot at getting some uber stock got it. that's very different from beyond meat and some of these other companies most people had never heard of, they were priced lower. people can learn about them later and get excited later. we exhausted the demand for uber when it came public, and it has not been the case for some of the other ipos. >> cameron, what's going to happen as a result of how uber has performed? there's been some rumbling that some of these companies stay private for too long actually maybe the ipo process and being public would have benefitted their discipline, but i don't know if that's really resonating among theand changin

mind-set do you think it has or will? >> i haven't seen like a chilling yet in terms of companies that are being built or started i think the big question is going to be what happens to the companies that have maybe similar models to uber like post mates for example in the delivery space is looking to come out is the uber ipo going to affect them door dash reportedly is raising a very large round right now, and so i think in the private space you haven't really seen the stumbles of the uber ipo having any effect. let's keep in mind, they've built a $70 billion company, so as a venture investor we'd all be lucky to have those kinds of mistakes in our portfolio. >> i would add luck and coffee to the list with uber and lyft in terms of post-ipo performance given just the chart over the past week has gone like this i realize that there's this debate about whether ipos and how they're received by public markets adds a chilling effect on the flip side could it be a market top could you see ipos continue to

push through the pipeline if there is this uncertainty around china and everything else and you want to go ahead and get it out to market now? >> ipo market has very clear cycles it's possible we're at the end of the cycle there's still appetite and you can look at uber and say what a disaster it still has a $75 billion market cap is doing fine. lots of folks have come in after the ipo. there's still demand there to your point, ipo cycle always ends the same way, which is suddenly you have a whole lot of stuff shoved out right at the top and everybody gets killed and nobody buys anymore for a while, and then the pipeline recharges and you have some incredibly profitable company that seems as safe as -- the most safe investment out there that finally goes out and that opens it up again. >> yeah. moving on to tesla, always new twist with them. down 11 days of the last 12, but higher this morning as a leaked e-mail from employees to elon musk says tesla's q4 deliveries

are on track to hit a record high elon musk, tesla, there's always some shift, some of it has to do with the actual performance. some of it doesn't some of it has to do with tweets this one, the main issue is capital, right do they have enough runway to get all of these mechanics right, and is china that trade situation going to throw a monkey wrench in their plan? >> this is one of the stocks, some stocks have religious communities around them. there's no other way to say it elon musk extraordinary entrepreneur he's done things that are unfathomable, will continue to over time, but i would say there are 200 points in tesla's stock that vary around whether people are believing elon in a particular moment or the fundamentals are looking so bad or issues are so bad that people are saying you know what, i just can't get there. that's where i think we are. yes, they need capital they need to run much more smoothly and a lot of the more

bearish analysts are saying there's a demand problem now and the company actually has to be restructured to meet the current demand, not some hypothetical future ghademand which it doesn look like they're on track for. >> you've been an analyst as we all know, and jonas puts a 185 valuation on the auto component of his call. that's how he in parts gets to this bear case number. isn't a $10 a tad irresponsible? >> it is certainly surprising to see the rapid turn around in big wall street sentiment on the stock, there's no question i readjonas's note a few years ago. that valuation is a lot. amazing, a huge part of his price target, which i think was then $400 was based on -- >> on the grid. >> a future robo taxi business it was just a concept, a model on paper, and yet it had tens of billions of dollars of value in the future stock price now the market is just simply

not willing to take that on faith anymore. the whole auto pilot thing is a problem. it's not an auto pilot, there are a lot of concerns around that and the new religious idea was there were going to be a million robo taxis it's too out there for where the company is right now. >> when you talk about the fervent community of long investors in tesla, really the nucleus of that is elon musk himself. a lot of focus coming to -- phil lebeau has been reporting on this, this idea he has hundreds of millions in loans against his stock and that if that stock price falls to a certain level musk himself might be forced to sell how big of a risk is that to the stock and just to the company and the narrative here >> it's absolutely a risk. you have a company with obviously a very involved and large share holding founder who has financial instruments that could affect the stock

i agree with henry, this is a stock that has fanatical religious following. what's happening now is a crisis of credibility there have been communications and tweets and things and people don't know what to believe in terms of the analyst and investor community i think in terms of the product and you know, people's love for the cars, that hasn't changed, so i think this company's probably going to be built to last and be around for a long time. >> what's your take, what stabilizes tesla here? >> i think just reassuring the market in terms of building their trust and credibility. here's the forecasting for the reports, i saw something come out about cost cutting is that real what does that look like something they're going to have to rebuild that trust. >> better data, better communication. thanks. >> great to be here, thank you. >> thank you. coming up, the doj's dell raheem saying he might still be open to the t-mobile sprint merger the founder of boost mobile is going to join us next. meantime, the dow continuing to sell off, though off lows of the

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news line, peter adderton founder of boost mobile u.s. and the former ceo thanks for joining us today. i guess first question here, do you think a deal between sprint and t-mobile actually gets the green light, and if so, do you think the divestiture of boost will be enough to get that done? >> yeah, i've been saying this from day one that the merger between t-mobile and sprint has to happen, and we've been pushing very, very hard, both the doj and s.e.c. to make sure that the low income customers, the prepaid customers are protected and the boost in metro pcs are two brands that compete hard in that market. the divestiture of boost is something we've been calling for and i think is something that will make this merger work. >> you've been outspoken about your desire to potentially bid for or maybe buy that boost brand back devil's in the details here. are you already having those types of conversations right now preliminarily, and in terms of

what that would look like the company potentially still using sprint spectrum and network, is that the right way to go with this yeah, you know, it's interesting because we obviously have been talking to a lot of different people, and i think the devil is in the details there's a lot of details that haven't come out, examples of is this an exclusive deal, is there certain people that can buy as an example can the american carrier tracfone buy it considering they compete against boost. i think there's a lot of devil in the details in who actually is in the ownership of that business the second thing which is really important is who's going to police that. who's going to police to make sure that the wholesale deal is good enough to allow boost to be able to compete, and if they can't get a deal done, then what happens? i think there's a lot of incentive on the table from both sides being the purchaser and the seller to make sure they get a deal done. >> peter, it sounds like you're framing this competition question around not just the number of independent networks,

but around those who are operating on those networks and what the economic terms are. is that a perspective that you're pushing as being the important way to frame competition, not just the networks but the players who are actually addressing the consumer >> absolutely, and you can't just look at the divestiture as the only thing that's going to make this work you've got to look at what does the divestiture look like. what does that wholesale look like in order for the mbno to compete it's got to have a deal that allows it to do that i think that's going to be critical here. if they don't get that right, then it really doesn't matter, so i'm pushing very, very hard both the s.e.c. and d-- that thy need to police that, they need to make sure that the new t-mobile doesn't do this just as a facade to get their merger through, but they generally are interested in showing that boost can compete. if you can't do that, then it

doesn't really matter, and i think the critics are coming out right now and saying hey, is this truly a divestiture that's going to work, is this a remedy that's going to work, and the answer is yes, but only if that wholesale deal and the new owners have the ability to be able to compete directly against metro pcs and directly against u t-mobile. >> of course we're having this conversation within the broader context of the rollout of 5g if you owned boost right now, would you continue to offer huawei phones to customers in the u.s. >> i don't know. that's a bigger issue than just for me to be able to answer. that's obviously an issue that the government's looking at and everybody else is looking at there are plenty of oem's in the marketplace that offer very good hand sets a the low prices that allow you to compete in that marketplace. again, that's something that's way beyond where we are today. >> peter, for the prepaid market in particular, how important is

it for 5g terms specifically and pricing to be included in the wholesale deal and the way the government, the doj polices this is 5g that important to the prepaid market, and does that need to be stipulated now? >> in the initial short-term, 5g isn't that important to the prepaid market and in fact, for anyone that's got a smartphone, i'm not sure whether 5g is going to be the holy grail that everybody's pushing it out to be >> why is that >> well, i think if you look at your hand set today and you ask what would you like your 4 g hand set to do, i think you'd say i'd like it to be cheaper and i'd like to have better coverage i don't think speed is the single biggest issue now are you going to download 25 movies in three seconds, no, because your phone's memory won't take that. it's disingeneral ewous to

continue to push the 5g into a smartphone if you start thinking about the fixed wireless broadband market which is where the prepaid low income customers come, absolutely it has a role to play in that market about 25% of the prepaid customers, the african-american and latina market they should be mandating that all prepaid mdnos can have full access to the network via 5g and 4g. i don't think you'll see a massive kbakts mas massive impact of people racing out to change their hand sets: what's the experience that's different than the one you get today on 4 g it's very nominal. >> i like the reality check on some of the promises we've been told about just to be clear, you don't think it changes the overall dynamics of the hand set itself given the difference in what you need in memory in your hand?

>> new york cio, i mean, again,p asking people, you've got a hand set in your hands right now. other than it being cheaper and having better coverage, what else are you looking for the hand sets are very past. they play back incredibly good video. they streamlive. what experience is 5g going to deliver, and you've got to remember from a consumer's perspective if they're going to be paying more for a hand set and arguably potentially more for 5g service there has to be a compelling reason to do that the compelling reason isn't the hype carriers continue to carry on with. what doesthis do to change my life if it doesn't change my life, i'm not going to pay more for it >> peter adderton, thanks for joining us today, the founder of boost mobile and trade tensions continue to hit stocks. dow is on pace for its fourth negative session in five you can see it's down 340 points we're going it take a look at the names having the biggest impact on the dow's drop

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welcome back, european markets about to close, a rough session with theresa may headlines top of mind. seema mody is back at hq with the breakdown. >> we'll get to that in just a second european markets down about 1.5 to 2% across the board led by italy. tech and auto stocks leading the way lower as is basic resources. a lot of attention as you just said focused on the u.k. today as prime minister may faces mounting pressure to step down after one of her key cabinet ministers resigned yesterday that marks the 36th ministerial resignation during may's tenure. may could announce her resignation in the next few days analysts expect a more hard line replacement. in response the british pound down and trading at its lowest levels since january, now down 14 straight days versus the euro amid those brexit concerns a

fresh batch of european data suggests an economic rebound to start 2019 could be short lived. the euro's own pmi missing estimates but what we saw was particular weakness in germ anyplace the country there pointing to weaker export demand germany is china's largest trading partner. meantime, a key measure of business confidence in germany unexpectedly dropping to a four-year low underscoring weakness in a number of sectors including retail and manufacturing. in response, we've seen the flight to safety in government bonds. germany's ten-year falling deeper into negative territory sliding back towards a 2.5 year low. back to you. >> seema mody, thank you. let's get over to sue herera for a news update. >> good morning, everyone. here's what's happening at this hour the pentagon will present plans to the white house to send up to 10,000 more troops to the middle east this to beef up defenses against potential iranian threats. officials say no final decision has been made, and it is not

clear if the white house will approve it in tehran, ayatollah camino is comcahastising the president foreign minister saying they did not follow his wishing when implements the 2015 deal here at home pacific gas and electric surprised the town of paradise, california, at their special town council meeting the vice president of electrical operations apologized to victims of the devastating camp fire >> on behalf of my company, i want to apologize for the role it had on this tragedy nothing i can stand up in front of you say can undo that >> if you recall, the town of paradise was completely obliterated by the camp fire that is the cnbc news update for this hour, back downtown to

"squawk alley," carl, back to you. when we come back, why -- the founder and ceo of american elements is going to join us and talk about why this is so important. dow down 344 dow needs about 311 points to avoid a fifth week lower we're back in a moment ...or trips to mars. $4.95. delivery drones or the latest phones. $4.95. no matter what you trade, at fidelity it's just $4.95 per online u.s. equity trade.

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let's keep our eye on the

selloff this morning, dow is down 355 under pressure over these renewed trade worries. majo major averages down over a percent. it's not all trade today, mike this market pmi number at 49-7 is a cycle low, and the commentary on business confidence was rather pointed, i thought. >> without a doubt and of course it does tie back to trade, but it does kind of morph a little bit more into more of a growth scare, which we've had for a little while now if you look at the way the treasury yields have been kind of compressed even more, kind of yelling for some kind of rescue from the fed, whether that would be a rescue or not and get it yesterday in the minutes of course, that was outdated commentary by the fed. the groups that are seemingly most acutely affected by direct trade frictions have had a lot of punishments meted out to them the question is is it enough based on what we know, and the other groups that have kept the

masht fr market from falling apart entirely, they can't do it every day. today the software index is down 2% and banks can't hang in with the yield curve. that's what we're doing as we chop around. it doesn't feel like some big intense flush. it seems like more of the same maybe this is just the new reality. >> right steve liesman's with us as well. i wonder given the pmi here and in germany and in japan and this imf take this morning, where do you think we are in terms of a growth scare >> well, i think there's a growth scare and i think there's a lot of uncertainty out there i was going back and listening to what powell said at his press conference in early may, and he said global growth was doing a little better. the trade was going to work itself out, and the brexit thing was okay, and all three of those things are now worse than they were before. so right now from a fed standpoi standpoint, coming from an economic standpoint, it really just raises the uncertainty, and it's the reason to hold back obviously i don't know what to

think about this when itf figure the economy is going, and also carl, significantly, i don't know, you've been talking about this there's a lot of different reports about how these tariffs will affect the economy. initially there's an inflationary impulse and on the back side of these tariffs after they're in place, it could weaken growth, so how you play it or how you factor it into your outlook for investment is very difficult >> yeah, immaterial i want to ask you about this new york fed forecast today too, steve, which is starting to get some attention. they try to evaluate the annual costs to households from tariffs, $831. what do we do with that? >> well, it's similar to a story i might point out we did last week, which is pointing out that the sum total of the tariffs enacted already, and this is before the president had repealed the canadian and mexican tariffs, made it one of the biggest tax increases that had happened in this country since 1993 now of course the president has delivered one of the larger tax

cuts as well, but from a percentage of additional revenue out there, so what it's going to do is it's going to offset some of the consumer that's out there. now that said, the consumer's pretty strong. jobs have been good. wages have been reasonably good in terms of their growth debt levels are reasonably low and confidence levels are pretty high those four things go offsetting. wait a second, there's going to be this creeping almost imperceptible rise in prices out there that will sum up and maybe show in the aggregates the average consumer is going to be paying more over the course of a year in different place. >> how big of a deal would it be if china just said these trade talks, they're off for now >> i think it would be maybe just an incremental big deal because i think we're getting somewhere close to that and feeling as if there's nothing particularly active going on right now. we're not really handicapping a known process that's happening that we can basically try and see the end point of, but i do

think to say that they're just off and we have to kind of, you know, price in all this stuff in terms of the tariffs as just the way it is i keep making the comparison to the original brexit, which by the way, this little trade friction episode over the last few weeks, it struck a market that was, yeah, getting a little bit comfortable, but it wasn't crazy expensive. people were not, you know, way super bullish in thinking this market was going to the moon, so that reduces how much we have to pull back. >> so you don't think within a percent of all times high was complacency? >> i actually don't. first of all, we were complacent but not like super greedy like january of 2018. we were really close to all time highs. guess what, right now we're flat for 16 months, so i don't think you had enough time at highs clicking to new highs to really build up this sense that things great. things better but not great. i do think that at some point you can kind of make your peace with this idea that china is what it is the trade situation is not

necessarily going to be a positive catalyst down the road, but just like brexit, which hasn't been resolved in three years, we're still sitting here and the market found another way. >> steve, last thing to you, we talked about the minutes yesterday. we didn't talked bullard and his line which kind of got buried that somehow six months of tariffs might get the committee's attention. what do we know about that >> you know, i think the six-month horizon is a pretty good thing right now, carl and i'll get to the bullard thing in just a second, but if you look at the minutes from yesterday, they said that if inflation doesn't come up in quote, unquote coming quarters which you could say quarters would be two quarters, i think that's a decent number, that they're worried that it will undermine inflation, so i think there's this six-month window. where does that put us 5 and 6 is 11. that's november, right so there's some fancy math for you on national television live. so you know, around november, around that last quarter of the year i think the fed might be

reassessing if inflation isn't going higher, if the tariffs are out there. it's important, carl, that they're seen and you can draw a line to a significant weakening of one of two things, either u.s. growth in the first instance and then global growth in the second instance with a knock on to the u.s. through the global growth channel, and the third way that it might happen is through the stock market, which the fed is obviously very sensitive to that. they see markets as the main conduit of policy, and they really see a downdraft in stocks that they believe has negative potentials for the economy >> yeah, not the only ones that are sensitive. steve, thanks. my thanks to you as well rare earth materials are used in a wide range of products from iphones to electric car motors, military jet engines and even baseball bats, and they're becoming another pawn in the trade war. rising tensions between the u.s. and china have sparked concern that beijing is monopolizing the

market on these materials and could leverage that dominant position in the trade war. joining us now, american elements ceo michael silverwho works closely with these elements at his privately held company. michael, it's great to have you on today thanks for joining us. >> yeah, thanks, morgan. great to be here when you see pictures of china president xi earlier in the week visiting one of these rare earth facilities in china, is the world right to be getting concerned about what the trade dynamics could do to that valuable market, and if so, what's at stake here >> well, i think the thing that's being missed by both the trade rep and by the marketplace is the fact that china doesn't need to cut off united states in order to create a real, real harm to the u.s. effort to rebuild our high-technology, industrial manufacturing sector. china has shown that they have this other strategy that i think has to be considered immediately, which is the

ability of them to charge a much lower price for rarers within china than the price they're charging outside of china, and this is something they did in 2012 it was stopped by the wto, but the fact that they're building this belt road initiative is going to put them in a position eventually where wto membership may not be so valuable to them, and the moment they leave the wto, the first thing one should anticipate is that they will make rarers maybe a tenth of the price inside of china than the price outside of china, so companies like general electric who requires a lot and others like that move their manufacturing to china >> wow -- >> china is not so much concerned -- >> yeah, please. >> i was going to say. you just said a lot right there. i want to dig into it a little bit more i know you've spent a lot of time in china and speaking to officials in china as well as the administration here. do you believe that china could actually pull out of the wto >> well, the concern that we've at american elements advised our

customers is to be concerned with the belt rose initiative, they may find the wto membership is too restrictive if they have the ability to, again, charge a tenth or some very low number for rare earths inside of china rather than outside of china, you're going to see movement to china and china is very smart. their concern is not so much just building up their gdp and building up chinese companies, it's about jobs. how do we get jobs to china and away from other countries because that establishes a country's standard of living for their populous, and that really is the game for china. it also creates the potential for causing -- you know, creating technology transfers and other valuable things for china. the critical aspect of this is that we need in our bilateral discussions to make this a critical position that china will not charge less within china than they charge outside

china. because their monopolistic position allows them to do that. as long as the price of rarers are consistent inside and outside of china, it doesn't really matter where prices go, which people seem to be concerned about. it's just keeping an equal playing field so american, europe european, and japanese companies can compete with chinese manufacturing. >> so your customer list here in the u.s., it's literally a blue chip list. it's gm, it's ge, it's apple it's lockheed martin, it's boeing it's united technologies, 3 m, johnson and johnson and the list goes on here what are the types of conversations you're having with some of these customers right now, and if you did see this price disparity take place as the trade war mounts and say china does leave the wto, what would that mean for american manufacturing? if we don't have a bilateral agreement that says that they can't charge a different price inside and outside of china, it's going to cause real harm. it's going to be the equivalent

of what labor was ten years ago and that the chinese labor costs were so low companies didn't have an option other than to put their manufacturing there. now we've got alternatives outside of china for labor, so this is another tool in the chinese tool chest to get companies to consider moving their facilities to china as opposed to setting up in the united states, which is what we're trying to do it just creates that kind of leverage we've discussed that with our customers. we have an advisory letter that goes out we've notified them this concerns them, and they should do what they can to get the white house and trade rep to bring this into the bilateral discussions. it's critical to the crites. >> michael, are you doing that are you planning to build out more in china because of these tensions, or are you doing the opposite >> well, we've been in china now for over two decades, and i'd like to think that my relationships with the chinese government are quite good, american elements i should say, not me individually.

we're having discussions with them about how we can retain our position in the facilities that we're involved with. the one thing also people may not realize is that china nationalized all the rare earth production we used to have a facility in china. it's now been rolled into bow tow high-tech which is a publicly traded entity in china run by the chinese government. so we're advising our clients to basically stay in touch with the government, stay in touch with the trade rep and make certain that we get this dealt with there really is no alternative they have 90% of proven reserves play tectonics went very well for china, so that gives them a leg up that we have to deal with contractually. we really have no choice you know, there's a facility being built or a processing facility being built in the united states by linus to bring materials here and people are saying we'll have access to rare earths thinking it's about an all or nothing

situation. that's not the way the chinese, they're smarter than that. it's going to be a price differential that's going to be the issue. >> we've certainly seen other companies try and do this in the u.s. as well and face difficulties, bankruptcy. >> yeah, they bankrupted them. >> we appreciate you coming on to talk about it, michael silver thank you. >> thanks, morgan. appreciate it. >> we continue to be all over this selloff, dow down 360, s&p down 1.3%, but first rick santel santelli, what are you watching today? >> ten-year note yields are down a half dozen basis points. the long end support we've opinion pointing out for months. the reaction is going to be swift. we're going btoe talking about that and interest rates and foreign exchange after the break.

santelli exchange time rick is in chicago rick >> thank you, jon. i look up and see what frezri treasuries are doing and see a lot of the global data on the soft side as well. but i want to draw your attention to a couple things that need to be pointed out. first, i would like to show a chart with april home sales. they were a bit disappointing. but were they really last month ended up getting a big revision, it moved up towards 720,000. as this chart clearly shows last month after the revision is the

best clip of new home sales going back to october of 2007. that is really a big deal. now, i'm not dismissing the fact we were down on the recent for april but i think that needs to be pointed out as well as the entire notion, and what i want to talk about today, global slowdown and much of the economic fundamentals of various parts of the world are definitely deteriorating that's why you see a boon, eight basis points away from the allest lowest ever yield close and if you look at the next chart, this is the ten-year lowest level so the real issue to me is how do you calibrate what is affecting our rates with respect to the rest of the globe now, today we see the global sell-off was higher and it comes into our markets and we're down a lot. but we could be down a lot more.

the tee trideteriorating global story is because of a lot of factors and one of the most difficult to calibrate is trade. the reason i bring it up, it will get solved or delayed that's important to point but. but the most difficult issue at all is try to divine if our market interest rates are down because the fed is really paying much more attention -- you heard yesterday dr. judy shelton, may be considered for a fed governorship he said central banks in particular need to pay more attention to market-driven rates. okay, they're down a lot today what should that tell the fed? seems easy, maybe the feds should ease. but are they down because of the u.s. economy are they down because of the relative value trade of all of the other economies? and how much bleed through will we get it's very difficult to tell. but in the end i can tell you one thing, don't dismiss the relative value trade the bank of japan and england

are still in stimulus mode and never tighten and that is having a huge effect on calibrating our interest rates morgan, back to you. >> rick santelli, thank you. stocks weighed down by trade concerns in the red across the board. dow down 376 a lot more on the sell-off straight ahead ♪ to inspire confidence through style. ♪ i'm working to make connections of a different kind. ♪ i'm working for beauty that begins with nature. ♪ to treat every car like i treat mine. ♪ at adp we're designing a better way to work, so you can achieve what you're working for. ♪

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first time in a couple of months. >> a lot of tech stocks doing even worse than that can you look at the list vm ware down 3% and a lot of smaller stocks suffering as well. >> across the board, pile on in defensive sectors, dow utility average is record day entry high. >> real estate has a shot at overtaking tech as the top year-to-date sector. that's saying something. let's get to the judge. >> thank you i'm scott wapner more than half of the s&p in correction territory this is one of the greatest money managers ever, could be, preparing for a big transition what is the state of the market? it's 12:00 noon. it's time for "the halftime report." one of the biggest names in the market makes a big change. today the details behind david tell tepper's decision and as the market falls, looking for opportunities for safety and high-yield etfs giving out

almost 6%. investment committee i